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S. Vaidya Nathan

INVESTMENTS can be considered in Franklin Prima despite the rise of about 170 per cent in its NAV over the past twelve months. But exposures can be phased out, perhaps using the systematic investment plan.

This will enable investors to take advantage of any decline in stock prices. Prima has been the top performer amongst equity funds this year.

The NAV of the Growth Option is Rs 79.30 and that of the Dividend Option, Rs 35.80

Prima's track record, especially over the past seven years has been impressive. It has outperformed the broad markets and peer funds, barring a couple, by a comfortable margin. The fund has done well across bullish and bearish phases. What sets the fund apart is the consistency in its performance across quarters. A sharp rise in the assets under management over the past two years has been handled well.

The fund focuses on mid-cap stocks. Even as the universe of mid-cap stocks have turned in returns of about 100 per cent, Prima has outperformed this category of stocks by about 70 percentage points. This points to good sector and stock selection as well as a high proportion of well-timed buys and sells.

Suitability: Mid-cap stocks tend to be more volatile, and trading volumes may also dip in sluggish phases of the market. The latter is not a problem this year in the bullish market. But these aspects enhance the risk levels associated with exposures in such stocks. Prima's risk profile is higher when compared to diversified funds that focus either on large-cap stocks or have a mix of the large-cap and mid-cap stocks.

But it has provided returns that more than compensate for the higher level of risks. For any investor interested in equities, Prima should be a preferred option to complement exposures in funds such as Bluechip and HDFC Equity, which focus on large-cap stocks. Investors can opt for the dividend option due to its superior tax efficiency; dividend is exempt from tax in FY 04.

Portfolio overview: Prima is aggressively managed with portfolio turnover (sales and purchases through the year as a percentage of average assets) in excess of 125 per cent. The portfolio is heavy on auto sector stocks with MICO and Ashok Leyland being the prominent holdings.

Stocks from the chemicals and engineering sectors have also been fancied. The fund had assets of Rs 385 crore under management at the end of November.

With the expansion in the universe of mid-cap stocks, the asset base cannot be considered as large. The fund still has considerable flexibility in buying and selling without suffering from high impact costs due to its size.

Fund facts: Prima was launched by Kothari Pioneer in October 1993, which is now part of Franklin Templeton. The minimum investment amount is Rs 5,000. There is an entry load of 2 per cent. There is no exit load. The fund manager is Mr K. N. Siva Subramanian.

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